Exam (elaborations)
Canadian Securities Course (CSC) Exam 2 With complete solution 2024/25
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Canadian Securities Course (CSC) Exam 2 With complete solution 2024/25
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Canadian Securities Course (CSC) Exam2 With complete solution 2024/25
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Fundamental Analysis ll ll ll ll ll ll ll ll ll ll ll
Accessing short medium and long range prospects of different industries for security
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prices. ll ll ll ll ll ll ll ll ll ll ll
Take into account capital market, the economy, industry, and the individul company
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conditions to find intrinsic value.
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Is it overvalued or undervalued? ll ll ll ll ll ll ll ll ll ll ll ll ll
Focus on what can effect the dollar value, ex. The expected / actual profitability ll
Technical Analysis ll ll ll ll ll ll ll ll ll
Use historical prices and their behavior to predict the future.
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Make sure to understand the sentiment not the fundamentals. Focus on the market. ll ll ll ll ll ll ll ll ll ll ll ll
Investors might act irrational based on those events. Is it recurring or predictable?
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- all influences accounted for automatically
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- prices will move in trends for a long time
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- believes the future will repeat the past ll ll
Program Trading/High-Frequency Trading ll ll ll
Sophisticated computerized trading strategies ll ll
Random walk Theory ll ll ll ll ll
New information is disseminated over time.
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Price changes are random. ll ll ll ll ll ll ll ll ll ll ll ll ll ll
Past prices are not useful because the company has already adjusted the price for the
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developments. ll ll
Rational Expectations Hypothesis ll ll ll ll ll ll ll
People are rational and have all the information.
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They make smart decision for self interest. Past mistakes can be avoided with new
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information. ll ll ll
Inefficiencies of market theoriesll ll ll ll ll
New information not available to everyone.
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Not everyone reacts the same.
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Not all forecasts are accurate. ll ll ll ll ll ll
Investors psychology or greed could be irrational. ll ll
Efficient Market Hypothesis ll ll ll ll ll ll ll ll
Stock price is the best estimate of true value.
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The profit seeking with react quick and adjust for intrinsic value.
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Stock price fully reflects all available information.
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3 Types of Information
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1. Weak: past information with current prices
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2. Semi-strong: public information in current prices
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3. Strong: all information in current prices, no advantages
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* strong is. Passive approach, they will buy and hold
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Fiscal policy Impact
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Tax Changes ll ll ll
Sales/personal tax goes UP ll ll ll ll
income and spending goes DOWN
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tax on profits for corporations goes UP
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LESS CASH for dividends or expansions
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Government Spending goes UP ll ll ll ll
Stimulates in the short run
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Can help implementation of government policies
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Government Debt goes UP ll ll
more restrictive policies ll ll ll ll ll ll ll ll
Savings plans increase available cash, so increase in demand ll ll
Monetary Policy Impact ll
Bond Market ll
More expnsions/credit ll ll ll ll ll ll
negative impact so BOC RATES GO UP
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To much growth, bond yields fall if economy is slowing down:TILTING
Inflation ll
Creates uncertainty ll ll ll ll ll ll ll ll ll ll ll ll
High interest, low profits, low price per earnings ratio, high inventory/labour, high prices,
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low customer service prices ll
Consumer Discretionary ll ll ll ll ll ll
Automobiles, apparel, consumer services, media, and retailing ll ll
Consumer staples GIC ll ll ll ll
Food, beverages, tobacco, household/personal products
AD
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Financials GIC ll ll ll
Banks, diversifies financials, insurance ll ll
Health care GIC ll ll ll ll ll
Equipment, services, pharmaceuticals, biotechnology, life sciences ll
Industrial GIC ll ll ll ll
Capital goods, commercial/professional services, transportation ll ll
Emerging Growth Industries ll ll ll ll
Continually developing to meet needs. ll ll
Unprofitable at first. ll
Promising furture. ll ll ll ll
Large start, negative cash flows. ll ll ll
Impossible to predict survival.
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Not always accessible to investors. ll
Speculative industries. ll
Growth Industries ll ll ll
Sale/earnings comsistantly expanding faster. ll ll ll ll
Common shares = growth stocks.
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Customer awareness. ll ll
Lower production costs. ll ll ll
Increased competition and demand.
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No large dividends, finance with retained earnings. ll ll ll ll ll ll ll
Increased price earnings ratio and decreased dividend yield
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Mature Industries ll ll ll ll ll ll
slower/stable growth, closer match to the economy. ll ll
Earnings are positive. ll ll ll
Increase in price competition. ll ll
Profit margin decreased. ll ll ll
Expand into new business. ll ll ll ll ll ll
Recession: decline in earnings less than others ll
Declining Industries ll ll ll ll
Stop in growth or declining. ll ll ll ll ll ll
Demand decreases because of change in technology.
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Can't compete with new costs. ll ll ll
Change in consumer taste. ll ll ll ll ll ll
Cash flow is big but not invested.
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Profit is low.
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5 Competitve Forces
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1. Threat of new entry : ease of entry, required capital, opportunities, channels, regulatory
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factors, product difference
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2. Competitive Rivalry : numbers of competition, strength, growth, unique products
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3. Threat of substitute : pressure, similar products
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4. Bargaining power of buyers : pressure for lower price, degree of influence, semsitivity
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5. Bargaining power of suppliers: pressure for higher price for resources, costs will effect
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profit margin or product quality ll
Cyclical Industries ll ll ll ll
Large international exporters of commoditites. ll ll ll
Sensitive to global conditions. ll ll ll ll ll ll ll ll
Expansion/contraction of the USA business cycle will influence profit
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Commodities, industrial, or consumer based ll
Defensive industires ll ll ll ll
Stable return on investor equity. ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll
BLUE CHIP : shares of top companies that are not effected by the economy much. Bank
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stock prices are sensitive (debt) and mortages are a large portion of revenue.
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Gas, water, and electricity based
AD
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Speculative industries ll ll
Risk/uncertainty usually high.
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Lack definitive information.
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Can be emerging growth companies or growth companies if investors have doubt. ll
Chart/Technical Analysis ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll
Support level : bottom price (sense value) unwilling to sell if the holder. S DOWN D UP
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